As exchange rates fluctuate and markets experience waves of volatility, it is essential to understand the factors that influence foreign exchange (FX). In this series, our OFXperts will explore the factors impacting market rates, such as; politics, economic policies, data releases, and current events. Understanding the reasons behind exchange rate fluctuations can help you plan for your business needs. By staying up to date on market movements, you can make better-informed decisions and potentially take advantage of opportunities while minimising your business’s FX risk.
In this introduction, we will dive into the causes of market fluctuations and help you understand how these changes impact FX rates.
Understanding fluctuating currencies and their impact on your transfers
Exchange rates are constantly fluctuating, making it challenging to determine the ideal time to transfer money. Market volatility can result in both unexpected costs and, at other times, it could present an opportunity for significant savings. We want to help you stay informed about the currency market, what impacts it, and how to stay knowledgeable in order to make informed decisions. Throughout this series, we will hear from our global OFXperts on what impacts the foreign exchange market and how to stay “in the know” about market moves.
Currency volatility can be your best friend but also your worst enemy. In an uncertain world, it is best practice to be prepared and knowledgeable about what factors most commonly impact currency exchange rate fluctuations. By staying informed and hedging currency risk when appropriate, you can mitigate the impact of these factors and protect your balance sheet from unnecessary losses.” – Treasury OFXpert, Isaac Figueroa
The importance of currency exchange rates in international transfers
Understanding the role of Foreign exchange rates in reflecting a country’s economic health is crucial when transferring money globally. Apart from inflation or interest rates, the foreign exchange rate is an excellent indicator of whether a country’s economy is on an upward or downward trend or at a relatively stable level. As a foreign exchange company with experts (we call them OFXperts) in treasury, trading, and market moves, we understand the complexity of monitoring multiple currencies and identifying when could be the best time to make a transfer. We know your time is priceless and watching the market can be a full-time job, which is why we’ve created this series. We’re pulling back the curtain to help you understand the factors that cause currency fluctuations and the events that could signify upcoming FX volatility.
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Key factors influencing foreign exchange rates
In this series we will cover some of the most significant factors influencing FX rates:
- Politics– Political factors such as political party economic stances, elections, social unrest, and geopolitical tensions can create volatility in the FX space.
- Economic Policies– Economic mandates like monetary or fiscal policies, including interest rate decisions by central banks, are among the biggest influencers of currency exchange rates.
- Current Events– Significant events like war, civil unrest, high demand for certain resources, and others can also influence FX rates.
- Data Reports– Report releases heavily influence currency exchange, with currencies often adjusting even before data is released as the market awaits reporting for past time.
This series breaks down each of these factors in a separate blog to discuss how they impact currency exchange, why FX rates fluctuate because of these factors, and how you can use this knowledge to better-navigate market volatility.
Interested in additional factors that influence exchange rates? Read about more causes of currency volatility here.
At OFX, we understand the complex interplay of economic, political, and social factors affecting exchange rates. That’s why we always provide you with competitive rates, outstanding customer service, and user-friendly platforms, allowing you to transfer money wherever you are and whenever you want. Register today and make your first transfer with OFX!
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Navigate rate swings in turbulent times. Our OFXperts can help you make more informed decisions about hedging and risk mitigation. Contact an OFXpert today.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
